Schroders
KBW European Financials Conference
trusted heritage
advanced thinking
Massimo Tosato
Vice Chairman
17 September 2008
Schroders plc
Overview
•
Independent
•
Exclusive focus on asset management
•
Global reach
•
Performance orientated
•
Diversified by geography, channel
& product
•
Financial strength
Bermuda
Cayman Islands
Mexico City
New York
Philadelphia
Amsterdam
Copenhagen
Frankfurt
Geneva
Guernsey
Gibraltar
Jersey
Lisbon
London
Luxembourg
Madrid
Milan
Paris
Rome
Stockholm
Vienna
Wiesbaden
Zurich
Dubai
Buenos Aires
São Paulo
Bold denotes Investment Centres
1
Beijing
Hong Kong
Jakarta
Melbourne
Mumbai
Seoul
Shanghai
Singapore
Sydney
Taipei
Tokyo
Schroders plc
Overview
FUM by Channel
Income by Channel
9%
12%
33%
52%
39%
55%
Institutional
FUM by Region
Retail
Private Banking
Income by Region
12%
6%
28%
39%
30%
25%
36%
24%
UK
2
Source: Schroders, June 2008
Europe
Asia
Americas
2008 Interim Results
Asset Management profit before tax £136.7 million
(H1 2007: £123.2 million)
11% ▲
• Income and profit growth in Asset Management
• Successfully repositioning Institutional
• Challenging market conditions in Retail
Private Banking profit before tax £22.3 million
(H1 2007: £15.9 million)
40% ▲
• Continued growth in Private Banking profitability
Private Equity and Group loss before tax £23.3 million
(H1 2007 profit: £46.5 million)
• Lower Private Equity realisations as anticipated and mark to market write downs on Group
ABS/MBS portfolio in Q1
Total profit before tax £135.7 million
(H1 2007: £185.6 million)
27% ▼
H1 2008 core business profits up 14% to £159mn despite difficult market conditions
3
The challenges
Asset management – a changing landscape
Channels
– Growth of individual and ‘instividual’ savings
– Decumulating investors outgrowing accumulating investors
Demographic development
Percentage of population, Europe
40
Accumulating (40- 59)
30
20
Decumulating (60+)
10
0
2000
Source: Mckinsey
5
2020
2040
Asset management – a changing landscape
– Increasing demand for investment solutions
Products
– Outcome oriented products
– Alternatives
– Asia and other emerging markets
Markets
– Sovereign Wealth Funds
– Growth opportunities beyond domestic client base
Business model
6
– Change in distribution dynamics
Value chain convergence
Manufacturing
Packaging/design
Distribution
Future battleground or partnership?
Strategic advice, insurance, risk management,
provision of beta, etc.
7
End client
Challenging conditions in Retail short-term
• Market volatility impacting retail
demand worldwide
• Record industry outflows in Europe
• Conflict of interest in commercial
banking distribution
• Balance sheet requirements
• ETF & MiFID
H1 Record net industry outflows in Europe
€bn
250
200
150
100
50
0
-50
-100
-150
-200
-250
H1
H2
H1
H2
H1
H2
H1
2005 2005 2006 2006 2007 2007 2008
Feri SalesWatch data, All Europe, ex Money Market including local to local and cross-border
8
Product convergence
Global product development continuum
Market tracking
Innovative products
Above
Average
Growth
ETF
Multi-asset
Structured products
Real Estate
Index funds
Hedge funds
Quantitative
Below
average
growth
Active equities
Active bonds
Money market
‘Traditional’ products
Revenue margin
Source: Putnam Lovell, TABB Group estimate, Schroders
9
Private Equity
Leveraging the opportunities
Leveraging the opportunities
Strength of international and channel diversification
• £130.2 billion funds under management, 61% outside of the UK
• Income diversified by channel: 55% Retail, 33% Institutional and 12% Private Banking
North
America
£12.8bn
South
America
£3.3bn
UK
£50.6bn
Continental
Europe
£28.4bn
Middle
East
£2.4bn
£3.3bn China joint venture
June 2008 funds under management: Investment by client domicile
China joint venture funds under management are not reported within Group funds under management
411
Asia
Pacific
£32.7bn
Leveraging the opportunities
Diversity of Product Range
Private Banking
9%
Multi-asset
15%
Alternatives
14%
Fixed Income
11%
FUM Data: 30 June 2008, Schroders
612
Equities
51%
UK equities
European equities
Global equities
Emerging market equities
Asian equities
Pacific equities
Asia pacific bonds
US equities
Quantitiative equities
Asia Pacific bonds
European bonds
Global bonds
UK bonds
US bonds
Commodities
Emerging market debt
Fund of Hedge funds
Property
Multi-asset
Private Banking
Leveraging the opportunities
Increasing capability in alternatives
• Property
Alternative FUM £19.0bn
1.1
• Fund of hedge funds
• Commodities & Agriculture
• Private Equity
4.8
8.0
2.2
2.9
property
fund of hedge funds
private equity funds of funds
13
emerging market debt
commodities
Our priorities
Institutional business
Strategy
Update
– Focus on growth channels
– Gross sales accelerating driven by new products
(DGF, LDI, QEP)
– Product strategy built around innovation
– Increase gross sales
– Grow profit margins
– Build opportunistic products for specific market
opportunities
14
– Lower redemptions
– Q2 2008 positive NNB quarter
– Swiss Re acquisition
Our priorities
Retail business: tactics for a bear market
Strategy
Update
– Getting closer to the client (direct open
architecture)
– Discretionary to advisory: UK over 75% and Europe
approximately 40% of gross sales in 2007
– Reposition as a solutions provider (outcome
orientated products)
– Growing multi-asset and absolute return products
– Defensive work activity levels are very high
– Brand and marketing investment to support the
above
– Increase presence in pre and post retirement
markets
– Complete selective regional growth
15
– Longer-term channel targets: insurance companies,
sub-advised and GFIGs
Outlook and conclusions
•
Challenging market environment to continue
•
Balancing cost discipline and investment for future growth
•
Well positioned longer-term
• diversity of business
• balance sheet strength
16
Forward-Looking Statements
These presentation slides contain certain forward-looking statements and forecasts with
respect to the financial condition and results of the businesses of Schroders plc
These statements and forecasts involve risk and uncertainty because they relate to events
and depend upon circumstances that may occur in the future
There are a number of factors that could cause actual results or developments to differ
materially from those expressed or implied by those forward-looking statements and
forecasts. Nothing in this presentation should be construed as a profit forecast
17